In my previous post, I discussed how the 9th Circuit appears dismissive of the notion that Boechler affects “refund jurisdiction” in Tax Court CDP cases. However, because the 9th Circuit didn’t directly address Boechler (despite the taxpayer’s urging), we don’t know exactly how or if Boechler interfaces with the Tax Court’s determination that it “lacks jurisdiction” to issue refunds in CDP cases.
Even disregarding Boechler, I have argued that the Tax Court may have jurisdiction to order some types of refunds. Summarizing my prior posts in a nutshell, I argued that the Tax Court could/should order money be returned to petitioners so long as the money was not a “rebate” refund resulting from an overpayment of tax. See IRC § 6401(a). As something of an oversimplification, a non-rebate refund is one that does not result from an “overpayment” of tax.
A good example of a “non-rebate” refund would be returning the “TIPRA” payment, which can be thought of as a “down payment” sent in by a taxpayer on an Offer in Compromise. And it just so happens that refunding TIPRA payments is exactly what the Tax Court said it lacks the jurisdiction to do in Brown. So much for my theory.
Or perhaps there is still hope… Indeed, perhaps Brown actually strengthens my theory! Read on to see for yourself if I am delusional.
At this point, there are four separate Brown opinions from the Tax Court and 9th Circuit, so it may be helpful to reorient ourselves with the procedural posture. That should also help us to determine exactly what is (or should be) at issue on the jurisdictional question.
In Brown I (T.C. Memo. 2019-121), the Tax Court found that there was no abuse of discretion in the IRS’s refusal to return a TIPRA payment on a rejected/returned Offer. The 9th Circuit affirmed that there was no abuse of discretion in Brown II (826 Fed. Appx. 673, (9th Cir., 2020)), but remanded the case to the Tax Court solely on the question of “whether it has jurisdiction over Brown’s TIPRA payment.” Apparently, the Tax Court hadn’t “meaningfully” addressed the foundational, jurisdictional question so the 9th Circuit wanted to know.
Which brings us to Brown III, where the Tax Court (in T.C. Memo. 2021-112) “shockingly” determining that it is a “court of limited jurisdiction.” Accordingly, the Tax Court found that it had no jurisdiction over the TIPRA issue. The 9th Circuit blessed this determination in Brown IV (58 F.4th 1064 (9th Cir. 2023)) and in a sentence that made me cringe, approvingly reiterated that the Tax Court “is a court of limited jurisdiction.”
Ok. So the question addressed on remand (“is there Tax Court CDP jurisdiction over the TIPRA payment”) was answered with a resounding “no.” How is that possibly a win in my “Tax Court might have jurisdiction over some refunds” argument?
It is a (possible) win because of the analysis leading to the conclusion, and the fact that the courts thought it necessary to analyze exactly what a TIPRA payment “is.” Allow me to explain…
Questions Presented, Answers Provided
Both the 9th Circuit and Tax Court frame the issue solely on jurisdictional grounds: does the Tax Court have jurisdiction to order a refund of a TIPRA payment? This is not a merits issue (i.e. “Should Mr. Brown get his TIPRA payment back?”) because that was already decided “no” in Brown I. Thus, it is a question of whether the Tax Court ever has the power to order a TIPRA payment be refunded.
If Greene-Thapedi were interpreted broadly (as it all too often is), it wouldn’t really matter what the “character” of a TIPRA payment is. All that would matter is that the taxpayer is asking for “money back” in a CDP hearing. The TIPRA payment could be a deposit, it could be a non-rebate refund, it could be, well anything and the Tax Court would say “no jurisdiction” if Greene-Thapedi is interpreted expansively enough.
But here, the parties wrestle with that exact issue (“what is a TIPRA payment?”) in their briefing, and the courts continue to wrestle with that issue in their opinion. That the courts find that question to be relevant to their jurisdictional inquiry is (I’d say) a win for team “Tax Court can sometimes issue refunds in CDP.”
I’ve argued that the character of the payment you’re asking for back (and the reason for its return) does or should matter to CDP “refund” jurisdiction questions. Arguably, Brown could be seen as support for that proposition, for the very reason that the court thinks the character of TIPRA payments matters to its jurisdictional inquiry. Or I could just be engaging in wishful thinking.
Tightening the Jurisdictional Straitjacket?
In my previous post I lamented how the Tax Court seems to read its jurisdictional grant in CDP cases as a straitjacket, preventing it from doing essentially anything to remedy an abusive IRS action if that remedy that isn’t explicitly stated in the statute. Since the statute just says that a person can petition the Tax Court to “review” CDP determinations (see IRC § 6330(d)(1)), any step beyond “reviewing” the action (say, ordering the IRS to remedy the problem identified) would fly in the face of the jurisdictional mandate. End snarky depiction of Greene-Thapedi.
Still, on occasion the Tax Court will subtly move beyond the role of observer in the sky to actual arbiter of outcomes in CDP cases. For example, we saw in Schwartz that the Tax Court may determine that there were overpayments that, via “credit elects,” wipe out other liabilities. In other words, the Tax Court may functionally determine an overpayment, and even functionally apply that overpayment to a back year… just don’t ask them to take one further leap and put that money in the petitioner’s pocket.
I worry that Brown may represent further needless tightening of the straitjacket because the decision can (and probably will) be cited as another example of how little the Tax Court will do when “getting money back” is at issue in CDP. Undeniably, the Tax Court holds that does not have the jurisdiction to return TIPRA payments. To some degree, that must be a tightening of the jurisdictional straitjacket, since a TIPRA payment is not your traditional “overpayment/refund” case. And yet, to conclude the straitjacket metaphor, there may yet be some wiggle room due to how the Tax Court characterizes TIPRA payments in reaching its determination.
The Tax Court characterizes TIPRA payments as “non-refundable payments” that must be applied to the “underlying tax liability.” On this understanding, the ability to get TIPRA payments is more restrictive than writing a general check to the IRS on a potential underpayment (in a deficiency proceeding), because under normal circumstances you could designate the payment as a “deposit.” See IRC § 6603. Not so with TIPRA payments.
Brown may require that I narrow my suggestion from “Tax Court can order non-rebate refunds in CDP,” to “Tax Court can order return of deposits in CDP.” That would be really cold comfort: I’d bet deposits are very rare in CDP contexts.
Oddly enough, however, one of the few collection statutes that deals directly with deposits strongly suggests that a TIPRA payment would be a deposit and that, on rejection of an Offer, the deposit should be returned to the taxpayer. See IRC § 7809(b)(1) and the hanging paragraph at the end of 7809(b). In any event, if the Tax Court can’t at the very least order the return of deposits in CDP jurisdiction I have no idea why it had to explain that a TIPRA payment isn’t a deposit before determining it lacked jurisdiction to refund it.
Perhaps, however, I can also read Brown in a more optimistic (perhaps delusional) way. On my optimistic reading, the reason the Tax Court can’t refund TIPRA payments is because they are explicitly “nonrefundable payments on the underlying liability.” Surely there are other nonrebate refunds that are not explicitly “nonrefundable,” such that the Tax Court wouldn’t be thumbing its nose at Congress if it ordered that they be refunded. At least one can hope.
Of course, I’ve saved the badnews for last: the Tax Court (and 9th Circuit) analysis of what TIPRA payments “are” is extremely weak. Why is that bad news? I guess you’ll just have to read my next post.